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OFFICE MARKET REMAINS WEAK BUT 365,000-SF LEASE AT END OF QUARTER PROVIDES HOPE
The Orange County office market continued to deteriorate with -277,600 SF of net absorption in Q3. This equated to an increase of 40 basis points in the total vacancy rate from 20.2% in Q2 to 20.6% in Q3. Direct weighted average asking rents dropped for the seventh consecutive quarter to $2.31 per square foot, per month Full Service Gross (FSG), a decline of $0.06 PSF from Q2.
The large supply of vacant office space is forcing landlords to continue to lower lease rates and to offer further discounts and concessions to attract potential tenants and to retain existing tenants. Until businesses start to hire again, the majority of transactions are comprised of firms relocating
to smaller space, causing the amount of available space to remain high.
The news item that garnered the most attention during Q3 was Maguire Properties’ decision to return six Orange County office buildings to its lenders: Park Place I and II in Irvine, Pacific Arts Plaza in Costa Mesa, 2600 Michelson Drive in Irvine, 500 Orange Tower in Orange, and Stadium Towers Plaza in Anaheim. At quarter-end, the Park Place office campus in Irvine continued to be in the headlines with Western Digital Corporation’s decision to relocate its headquarters from Lake Forest to 3355 Michelson Dr. This ten-year lease for approximately 365,000 SF is the largest new lease signed in Orange County this year.
Contact Jared Dienstag at 949.724.5515 for more information.
  OFFOC09Q3.pdf
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